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In short, no. There is no such thing as Influencer Tax. There are, however, tax implications attached to being an online influencer.
To be an influencer, you have to declare your earnings to HMRC, whether you influence part-time or if it accounts for your full-time livelihood. If your earnings exceed a certain threshold, you will owe tax on them as well.
First things first, let’s define what we mean by influencer. In the social media sense, an influencer is someone who has the power to influence their (usually substantial and loyal) following to act in a certain way when prompted. Influencers are used by brands for endorsement, to boost their product sales and/or to increase their following.
In 2019, there were 3.5 billion people using social media worldwide. That’s 45% percent of the whole world. By anyone’s estimation, that’s a pretty big reach.
As with all self employed workers, influencers are entitled to a tax-free Personal Allowance of up to £12,570 per year. In other words, you don’t owe tax on earnings up to this amount – but you still have to complete a Self Assessment.
The Competition and Markets Authority (CMA) clamped down on influencers in 2019 about the transparency of their endorsements and sponsored posts. Owing to the level of swaying power that they have on what we buy, where we holiday, the products we use etc., the CMA put some guidelines in place. “The CMA considers payment to be any form of reward, including money, gifts of services or products, or the loan of a product.” They also consider freebies – even when a product is sent without prior warning – to be a form of payment.
As you can imagine, this can make taxing difficult. Where a contract is involved or an influencer invoices for their services, it’s easy to calculate where tax is due. Even if a brand gifts an influencer, if they’re already working together, this can be taxed under the Income Tax (Earnings and Pensions) Act.
This is where it gets tricky. A payment-in-kind is a payment in return for a service or goods that isn’t cash.
If, instead of being paid in cash, an influencer is paid in clothes, holidays, protein shakes, skincare products or anything else ‘gifted’ in exchange for endorsement, you can be liable to pay tax for the monetary value of the transaction. If you’re gifted a yachting experience, for example, you could owe tax on the cash equivalent. These rules are most likely to affect high-profile influencers, but you should be mindful of them whatever the size of your following. You could end up paying tax on items for which you never actually received cash payment.
If you’re considered to be ‘trading’, you’ll be liable.
To murky the waters further, trading isn’t specifically defined by HMRC for influencers. As a guideline, let’s look at how a literary author would be considered trading. The Institute of Chartered Accountants in England and Wales explained that if you organise your life to regularly spend time writing to produce work with commercial value, and strategically market it for your financial benefit, you are considered to be trading.
For influencing, if it’s one of your main sources of income and you organise your life to regularly spend time working on posts with commercial value, and share them for your own financial benefit, you’ll be considered to be trading.
Basically, it’s important to try to secure written agreements that set out your relationship with brands. This makes recording your work easier and provides you with hard evidence of your income should HMRC come knocking.
Like all self-employed workers, influencers can deduct expenses from their tax bill. This can include things like camera equipment, your phone, your laptop or computer, travel expenses, marketing costs etc. Any reasonable expense accrued that is work-related and that you can clearly account for can be claimed.
Read about expenses in more detail here.
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